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HST Rebates on New Homes

When purchasing a new home in Ontario a cost consideration is the HST that is payable on the home. To ease this burden the Ontario government instituted a rebate program known as the New Housing Rebate (the “Rebate”) which is rebated to the Purchaser. The following blog post outlines when you may be eligible for

the Rebate and how to apply for the Rebate.

How much is the rebate?

The Rebate allows purchasers to recover some of the federal portion of the HST which is 5% in Ontario and 8% federally. As the builder/vendor has paid the HST on its construction the builder agreement will state that the purchaser assigns the Rebate to the builder/vendor.

When are you eligible for the rebate?

You would be eligible for the rebate if:

you bought a new or substantially renovated house from a builder and HST is due on closing;
The builder sold the purchaser the house and related land on which the house is located under the same written agreement of purchase and sale;
When the purchasers signed the agreement of purchase and sale, it was intended to be the primary place of residence for the purchasers or their relations;
Ownership of the house is transferred to the purchasers after construction or substantial renovation is completed;

No one occupied the house before possession being given to the purchasers; or
The purchasers or their relations are actually the first occupants of the house after construction or substantial renovation.

In order to be eligible for the rebate the purchaser must intend to use the home as their primary residence or for a relative of the Purchaser meaning a blood relationship, including a child and grandchild, a brother or sister, and relationships by marriage or common-law partnerships – cousins, aunts, uncles, nephews or nieces, friends and business associates are excluded from eligibility. So for example, if your intention is to buy and flip the home you will not be eligible for a rebate. The factors the CRA looks to in determining whether it is a primary residence is whether the individual considers it a primary residence, the amount of time they have lived in the home and the designation of the home on your records.

How do you apply for the rebate and what if I rent out the new Home?

When you buy a new home from a builder the builder will usually credit the Rebate and you then assign the Rebate back to the builder/Vendor. These Rebates are therefore most often incorporated into the purchase price of the new home by the builder and the Rebate gets assigned to the builder on closing. If you do not qualify for the Rebate (for example you or your relatives do not live in the new home) the builder will add the amount of Rebate that you would have been entitled to (had you qualified) to your purchase price. The builder/vendor will require you to sign and deliver an affidavit on closing to him confirm that you or your relatives will be living in the new home.

Many buyers do not qualify due to the fact that they are purchasing the home to rent out as an investment. In this case you will have to pay the Rebate back to the builder on closing (the Rebate will be added to the purchase price) and once you enter into at least a 1 year lease with a tenant for your unit you can apply to have the Rebate repaid to you.

Canada Revenue Agency has a major audit plan to ensure that purchasers or their qualified relatives are actually moving into the new unit as their primary home. If you are audited you will be asked to supply to Canada Revenue Agency evidence that you moved into the home – e.g. invoices from moving companies, post-office proof that you changed your mailing address, proof that mail is actually coming to your new home, etc.

Summary

If you have any questions pertaining to the rebates discussed in this blog post or any other real estate law questions please do not hesitate to contact us. We can assist you in applying for the rebate if you did not qualify on the closing of the purchase of your home.

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